threshold distances which we've heard about for adjacent waters and case specific other waters are measured from the ordinary high water mark. and given the pervasiveness of ordinary high water marks on the landscape, it will become almost impossible to fall behind these distances moreover, even if the water is outside. it can still be regulated as long as it's within 4,000 feet of an ordinary high water mark. these limits are even less meaningful in light of the agency's position if any force of a feature is within the limits of the distance threshold, the entire feature is jurisdictional, but erosional features are excluded but only if they lack a bed and bank and ordinary high water mark. so it's kind of circular and in

practice going to be very difficult and not helpful. similarly, ditches are excluded unless they were excavated in a tributary, unless you can prove there wasn't an ordinary high water mark there on the landscape. it could have occurred a long time ago. ultimately, what is the difference between a femeral ditch and ephemeral streams that are regulated. it all comes back to the term ordinary high water mark. there are also concerns with other key exclusions. for example, exclusions for waste treatment systems, storm water systems, artificial ponds and water filled depressions are all tied to having the establish the feature was created in dry land. you have to prove at the time of the feature's construction in 1910 it was created in dry land

and importantly the agencies specifically state there is quote no agreed on definition of dry land. given this ambiguity, it fails to provide clear exclusions, on site industrial waters and storm water systems, the aim of the rule was to provide clarity and make jurisdictional decisions easier. but all of the rules vague and complicated definitions will be difficult for the public and local regulators to implement, especially the corp of engineers. just to close by illustrating how complicated it will be i wanted to read an example given by the agencies, the agencies themselves in the preamble to

the rules. the agency state that quote under category a 8 the agencies will evaluate on a case specific basis whether a low centered tundra and pattern ground bog in an area with a small flood plain and located beyond the 1,500 foot boundary but within the 100 year flood plain of a traditional navigatable water or within the 4,000 foot boundary or a we land in which normal farming or ranching activities occur as those terms were used in section 404 and implementing regulations has a significant nexus as defined in the rule. you tell me if that's going to make jerusalem dickurisdictional determination simpler. >> thank you. appreciate you being here today. next we'll turn to john divine, he's an attorney in the defense counsel. john leads a clean water solutions team where his work focuses on implementing,

defending and strengthening core the water act programs, prior to joining, he was in the office of general counsel and prior to law school, he was an environmental protection specialist. john, thanks for coming over. >> thank you, scott and thank y'all for including me in today's session. in general, we at nrdc view the clean water rule as a major step forward and we're grateful to the obama administration and the people in the agencies like ken and craig who not only had to wade through a mountain of scientific and public input on the rule but also whether baseless claims of being power mad, bureaucrats and bent on destroying the american economy. i imagine most folks here would be able to predict my reaction to specific parts of rule given that my view is that the supreme court did not mandate anything

close to a major entrenchment on the scope of the clean water act and given our review of the evidence leads us to conclude that all sorts of water resources are important to the overall integrity of the aquatic system. we're supportive of the aspects of the rule that guarantee protections to those that science shows are critical mainly tributaryies and nearby waters. we had hoped for more certain protection for other water bodies but the rule leaves many of those decisions to a later evaluation of the watershed level of the i'm packs to down stream resources. we believe that the proper application of this analysis will lead to waters protection, but we think it will require us to be sure. on the other hand, we were disappointed but those areas where the agencies excluded

features categorically from the law. especially in those instances where the agencies experts science advisors urged them not to provide category exceptions. we strongly pushed the agencies to project so-called isolated waters where the science shows there were significant as a category. as well as certain man made tributaries that had long been protected by the law. but the final law kpemts a number of those features outright. on balance, though, we think the benefits of restoring guaranteed protections to the waters at the core of this roll is a major improvement. it assures protection for the kinds of streams that provide supply for the drinking water, providers for one in three americans to say of the wetlands that prevent flooding filter pollution and support all manner

of wildlife. so thank you for having me. >> thank you john. we appreciate it very much. we have a number of questions. i'll allow the panelalists to and questions and pose questions. to start with, ken, we had questions about tributaries, is there anything you'd like to respond to about ordinary high water mark, anything will you tell that comment? >> thank you. we look very kafrcarefully at the science. what does science tell us of impacts on upstream waters and down stream waters and from a standpoint waters are connected but also know that the court has made it clear that the clean water act is not apply to the water simply because it's connected from an upstream to a downstream water.

we wanted to see where it was significant. we know that the science indicates that those effects have to be measured but they also have -- you have to be able to find an indication of sufficient flow for water to get from the upstream area to the down stream area. that is why we use the concepts of a bed and banks and ordinary high water mark. we also understand that the concept of an ordinary high water mark is something that has to have some regional varability to it. simply because it is a physical feature. and it will not appear exactly the same everywhere in the country. but we do have a history of working in this area and we will continue to work in this area. we actually think that by adding physical characteristics to the definition of tributary for the first time that we've in fact made it more clear. we've taken some of the guess

work out. we now know that while deirdra has raised the question of how do you tell there's an ordinary high water mark, we have for the first time put in a rule requirement those things be present. we will continue to work so the public has an understanding and the regulators have an understanding of what's intended by using those features. but we think that those are important components of the rule and improvement over the existing rule. i also if i could just very briefly comment on you know some of the exclusions that are in the rule obviously, many of those are carried forward from preamble language. so the agencies have practice. i would speculate the regulated public has practice in how they work. and some of them even like for example, the waste treatment exclusion that was mentioned we

carried forward unchanged. so if there are questions going forward as to what the new rule is going to mean they are the exact same questions that have existed since the 1980s when it was first put in the rule. >> thank you. craig, how do people who are facing this and needing to make their own determination the idea of the rule was to let people take a look and get a sense whether they were included or excluded, does the corp have documents they can consult to determine what a high water mark looks like, will there be a guidance put out by the corp in the future helping to explain what the law means? do they look at the 200 page preamble of the rule? what would folks do? >> the corp regulators have interesting tools available to them. to include manuals that they

use. i don't think it's as hard to identify an ordinary high water mark as deirdra was attest to. the industry knows, again the one thing that in the definition, i would point out that it wasn't identified in her comments was that notwithstanding you have an ordinary high water mark which has a bed bank and a physical indicators of a bed bank and ordinary high water mark, that there has to be of a sufficient type that contributes flow to one of the waters that are nav navigatable. those are readily evident and ken says in certain types of the parts of the country they're different. they're different appearing.

but i don't believe that they're that difficult. the corp relgulators are well-prepared. these are experts, people who are experienced in these matters. they use all the tools that are available to them. and they do discuss that with the applicant. they go out and do site visits. and so it's not that difficult to find an ordinary high water mark. >> if i could add something to that. the agencies existing definition, the one that is being changed just protects tributaries without elaboration this provides further definition as to what that involved. and in some ways we urged the agencies not to go. in the proposal for instance wetlands and ponds that act as

tributaries that are the source of water for downstream streams could have been considered tributaries under the rule and protected as such. the agencies opted in the final rule not to do that. because those features typically don't have an ordinary high water mark. and so that's among the ways that we had actually urged the rule to be stronger. and was not. but a choice that the agencies decided was necessary to give greater clarity to the regulated public. >> how would you recommend that approach in lieu of any comments? >> let me comment a bit and to say that the siebs supports the ordinary high water mark is disengenerous. al i don't think the epa report

the connectivity report examined the concept of ordinary high water mark at all. so you know i'll leave that. two, i think that as craig said it's not hard to find an ordinary high water mark. they're all over the place. they can be found almost anywhere. if water has passed at some point in time over the landscape in certain parts of the country, they are pervasive. so i'm not saying it's hard to find them. i'm saying it's not a reliable indicator of sufficient flow. which is why the science should have looked at the concept of ordinary high water mark. and i think if the public comments, the substantive public comments where people actually, you know were thoughtful in what they were saying if those had been reviewed carefully, which i assume they were, i think you -- the agencies would

have seen a lot of people gave a lot of thought and comment on the term ordinary high water mark being highly problematic. so that's my perspective on ordinary high water mark. with respect to the exclusions remaining largely unchanged. like waste treatments, that may be the case. but the real problem is that the definitions have not remained unchanged. tributary now has a broad definition, includes ditches man made conveyances in a explicit way. there's a new category of waters called adjacent waters. waters are broadly defined. so that's why i think a lot of comments raise concerns about these exclusions maybe not being as clear as they could or should be. because you're now have these broad other categories that weren't in the existing

regulations before. so -- >> thank you. i saw a question in the audience. let's start. >> thank you. i'm with the national association of home builders. i want to step away from tributary for a second. and actually explore the eighth category of waters these are those that are within any of the 100 year flood plain or four thousand feet provided they have a significant nexus to a one through three water. i want to go through a scenario here and explore the quote, common sense that craig said earlier was used to base jurisdiction on the clean water act. to really understand this, we have to understand two terms, significant nexus and we have to explore kind of the science or common sense behind the

4,000 feet. significant nexus, i want to pull out two examples of what could in and of themselves prove a water has a significant nexus. this is in the cfr language for the final rule. e would be run off storage and f would be contribution of flow. if a water storage run off it would have a significant nexus. or if it contributes flow it would have a significant nexus. waters can function as a source or sink. they can do one or the other. effectively the way i would read this, if you contribute flow or store flow or water, you have significant nexus. then secondly, we need to explore this concept of within 4,000 feet of a one through five water. and i'd like to point our attention to the epa's own economic analysis for the final rule that says quote, the agencies have determined the

vast majority of the nation's water features are located within 4,000 feet of a covered tributary, traditionally navigable water or territorial sea. we believe very few waters will be located within 4000 if he happen. it's nearly impossible to find a water -- this is in the agency's language that would not be subjected to a nexus test. to have a significant nexus you have to either store water or contribute water. wouldn't that be all waters? my question is is that the common common common sense that's used to provide clarity under this final rule? >> well there was a lot there. let's start with the -- these are isolated waters we're

talking about. >> so explain to me again what the first part of your concern so that i can address it specifically about storing and contributing flow. >> sure. can you name for me a water that either would not store, runoff or contribute flow? >> first of all, you can have both but they may not have a significant enough of a nexus due to their -- their distance. they could be at the outer end of the 100 year floodplain. >> i would agree with that but a significant nexus -- a function of a water that has a significant nexus is defined in the final rule is defined as one of those functions. it's can't be just -- >> you are talking about the eight or nine functions. >> yes.

>> if i could -- oh, and thanks for allowing i think for clarification on. this as you pointed out, we listed functions under the significant nexus test and that was in response to the various public meetings that we held, the agency held over 400 public meetings and i think you personally participated in more than one but we received in excessive a million comments. and in answer to your question, yes, they all were looked at. but -- and considered. but i think what we -- so what we heard was you've said significant nexus in the proposal. we did a pretty good job of repeating what justice kennedy had said in his concurring poib

but people said that didn't provide enough meat on the bones, if you will. could you not look at other ways to better quantify what is a significant nexus. and what the agencies did was we heard a lot of can you take these qualitative concepts and turn them into quantitative concepts and we looked to see if there was a way to define significant nexus. should the flow by x number of feet per second and at what time of year per average and is there a way to do something that was measurable. is there a -- so we looked at that. and we determined that the science did not support that. that we could not come up with a series of quantitative ways to measure what was significant but thought what we could do is be more transparent in the final rule about what the functions were the agencies could consider in doing a significant nexus

anatsis. those are the functions you see alisted in the final rule. i believe we've tried to make it very clear. if we haven't we will continue to make it more clear. those are functions that will be considered. al but the single presence of a function does not necessarily make it jurisdictional. as craig said, it has to have a significant effect. you are probably correct, in terms of looking, it either contributes or holds flow. that is the entire universe. that is the yes and and the -- and the no. but we do know different water features provide those functions and their significance can depend very much on which of those it is. in fact, justice kennedy in his opinion even said that sometimes it is the lack of a connection that provides the significance. and some regions of the country, the pothole region of the country is a good indicator of

that. and i know i've gotten long on the answer and i have acknowledged your question but the agencies will not look at the list and say if i can find one of those, boom, you're in. the agencies will have to find that -- and we believe this is explained in the preamble, it can be a single one of those functions but it would have to really be much more significant and robust if you are relying on one function. it could be a combination of functions but you are still looking for something that has some significance. if you can find a scintilla of evidence that that would get you over the threshold. i hope that helps you answer. >> it does. can you explain where the 4,000 foot bright line quote, unquote, came from. >> well, again, we were trying to be responsive. people had said, when we introduce the definitions and associated with adjacency in the

proposal, people said could you draw more bright lines, could you be clear. if you recall, we had proposed to use floodpain or ruparian area. we were told that first of all, people were not comfortable with us using the term repairing area because they felt it was too exact and ill defined and we heeded that and we did not articulate a floodplain because of the variability of the size and the inexact nature of the flood plains that are known out there. and we were -- we heard overwhelmingly in the public meetings in our comments that would you pick a floodplain and work off of that. we remained concerned about -- about establishing adjacency jurisdiction in a floodplain when the floodplain could be very large in certain areas of the country.

so we then looked at ways to translate what is effectively an inexact science into something that is more predictable and more clear on its face. and so then relying on what the science told us, relying on the expertise and experience of the two agencies, as to where we felt you were likely or not likely to find a water that had a significant nexus, we then spent some considerable time figuring out whether there was a place for us to land, knowing that once we draw a line, we're going to create something inside something and outside and it is not going to be perfect but we think it is largely substantiated by the evidence we have in our record and over the many years of the agency's work in this program. >> and i just want to make sure for everybody's benefit that for the most part we believe that --

that the 4,000 foot will cover the 100 year floodplain. in certain large river systems, the 100 year floodplain may be on the outside of the 4,000 foot but in most cases, particularly not in the smaller rivers, that the 4,000 foot limit is the outer limit of the jurisdiction. >> thanks, craig. we have a question online and then move up front. police -- please notice the strum water control features. the skplugs features seem quite low. please explain the control features not on dry land and is there any more explanation on what dry land as deidre referred to. >> sure. thanks for that question. when we set out this rule we intended not to effect the jurisdictional status of water featured inside a ms 4.

we heard from working with working with communities around the country, the permitted entities, that there were concerns we may have effected the clean water jurisdiction of these permitted entities and the reason for that was unlike most 402 permits which are a pipe or a ditch or something like that, while a municipality does have outfalls, they are also permitted on a geography basis. for example, the district of columbia's storm water permit covered the district of columbia and within there you have nacheral features that are carrying storm water and are part of their general and overall storm water system. and for example, we have well-known rock creek carries storm water when it rains. so the idea that the communities raised with us was, are you

saying that the rock creek for example, because it is a jurisdictional tributary to the potomac, it is a jurisdictional water in and of itself such that the storm water has to be treated before it got into rock creek even though rock creek is part of the over all system that controlled storm water in the district of columbia. and so the exclusions that we put in were designed to address the -- the ability for communities to look at their totality of their storm system and look at things such as retention ponds, green infrastructure components and those kind of things being built as part of the system and make sure we were not bringing all of those things into this -- into the permitted 402 system. and that is what that is about. and we believe we've retained

the status quo so that water features that are within the geographic bounds of a community that is permitted under the ms 4 program if they are jurisdictional today they will stay jurisdictional. if they are not, they will not become jurisdictional. and that's what's behind that. we set out not to change things. and he believe in the final rule we've not changed things. >> so, ken, as an example, a rain garden that a municipality designs to capture and infiltrate forest water, if that took on wetland characteristics over time, that would not be covered water. >> that is correct. and so we would hope it would take on those characteristics over time because it would do a good job of taking over pollutants but taking over commercial development and you see them all over the place and the use of green infrastructure is something that our agencies

strongly support and we want to encourage it and do not want to create a fear in a regulatory environment that we're taking a way a tool that we think is valuableiable and has proven to be very popular both within the communities, within local governments, but also in response to the development community who makes use of this all over the country. >> can i raise just a question about the rain garden example and maybe talk from a practical, experienced perspective. which is say the entity has created the rain garden wetlands have developed fast forward 20 years. you know and it's a wetland. and you know relying on the exemption for green infrastructure created in dry land talking to a regulator trying to tell them that the rain garden which is now functioning as a wetland was

created in dry land becomes very difficult from a practical point of view i think. i don't see anything in this rule on the face of the cfr language that gives that entity a lot of comfort that were you to go out and undertake this activity now that you have -- you will have certainty 10, 15 years down the road that you can point to in rule language that you are exempt. that's one question on the green infrastructure. i have another on the ms 4 if time permits. >> well let me respond to that. first of all, of course, we're talking about areas that are subject to the permitting program in 402. and i'm expecting that 20 years from now that community is still going to have a 402 p permit. it is not as though they are going to completely lose track of where these rain gardens are. secondly, if the rain garden was put in and takes on the characteristics as we hope of

functioning wetland. the clean water act will take effect if somebody want to dump pollutants in -- >> and can i say that and i hear you say that in outreach and oftentimes municipalities, local governments and also just entities that have a facility have these features on their property and they want to actually improve them, change them in a way that may be beneficial for the over all management of water on the site. and that then raises the concern of triggering permit requirements. it also raises the concern of other elements of the clean water act, like water quality standards. even if you aren't undertaking the destruction of that feature, apply. so the fact that something is water of the united states limits and that is i think the goal -- limits the ability to do

things in that regardless of whether you're trying to destroy the area or change the area. >> i will only respond that i guess we'll know in 20 years. but i find it to be a little overly speculative that in a 20 or 30 year time frame somehow both the regulated entity and the regulators will lose track of the fact that this rain garden was put in as part of the storm water permit program. and i will concede, it is conceivable that people could lose track of it. but if you are living in a world where your permit is renewed every five years i find it stretching it a bit that in 28 years or 25 years or whatever that everybody is going to forget. i also would say it was put in, it was exempt when it was put in and if a community wants to come in and makes changes or improvements to it, you haven't out lined a factual situation to cause the exemption or the exclusion i should say from the clean water program to change.

so i just -- i realize that what you are raising is a hypothetical. i can't say definitively it cannot happen but your hypothetical is raising a set of facts that i find a little overly speculative that it will be a problem when you are living in a world of an already regulated entity. >> okay. can i also just chime in because the whole notion of an exclusion being tied to created in uplands or draining uplands or created in dry lands, whatever the phrase is, as you said, was in the preamble, and there were exclusions to the preamable and so i think the regulated public and i personally have been involved in jurisdictional determinations where the fact pattern scenario that we are talking about which as a feature was created for a purpose, maybe

not rain garden but for an industrial use, was created in a water of the united states, before the clean water act, and then now 20, 30 years from -- from now, today, you are being forced to assess was it created in up lands, dry land and you are looking at all kinds of historic evidence, it is very complicated even where you've had that feature created through a permit, these are real factual circumstances that occurred under the skplugss -- exclusions as currently exist. >> i will say i do find it interesting that the points that we're hearing that we're being criticized for doing is we're taking language out of a preamble that has no real operable effect that preserve the right for the agency to change its mind any time it chose to. then we put it into a final rule which binds the agency.

we no longer have the discorrection to change our mind. and put in the same concept that has been around for well over 20 years. we formalize it and make it legally binding and are criticized for it. and so the option for us would be to go back and take the exclusions that we proposed in april of last year and simply take them out. and then that would have left everybody with far less rights than they have today. and so while i hear that you would have liked to have had more clarity and specificity, i don't want to lose sight of the fact that we have done here is created exclusions from the clean water act that do not exist today in the rule, they exist mostly in practice but not in the rule and we put them in the rule and we're being criticized for them. >> and i would like to build on that. i mean, it is impossible to describe with specificity all of the kind of water resources that

exist in the united states. i mean, in a rule of length that isn't biblical, it is impossible. and so there is -- there are going to remain questions in the future about how the specific language in this rule apply to factual situations, and that is -- that's just part of the deal here. with respect to things that might be marginal or have been created in waters originally, might not have been, looking at those closely in the future doesn't trouble me. i imagine it might trouble you, in the least. because what we're talking about here is whether or not we're going to allow their destruction or pollution without a regulatory over sight.

and having that check-in before those kind of things happen to such features is often very much appropriate. >> so i want to make sure we don't lose questions in the audience. ken, could you pull the mike are phone up closer to you. we have a question up front. >> thank you. i'm liz burnbalm with scb strategies. it is interesting the conversation got around to the question i have which is for deidre. at the end of your talk, you quoted an example from the preamble and suggested it wasn't a model of clarity and my reaction was pretty different. i thought it was clear. i thought it contained a number of detailed criteria but then having that detailed criteria was necessary to make it clear. and so i'm wondering, from your perspective, is there a single

criteria that would designate the jurisdiction of the water act and that is reductionist and what does clarity look like if it doesn't look like a detailed set of criteria. what do you think would be clarity and what would it be look like if it wasn't trying to write down all the conditions. >> i would love it if you diagram the example and explain to me -- i didn't say it wasn't complicated and having a junior level core district gs 12, 11, 10 -- i don't know what the core regulators are in the field working through this example will be challenging. i don't know if you've ever worked with on a jurisdictional determination with somebody at the corp of engineers but it is challenging. and an example like that would be difficult. in terms of clarity, i would go back to the term ordinary high water mark.

for -- ever since i've been a lawyer, which i graduated in 1996 and worked with the army, the term ordinary high water mark has been a term that people have longed for some clarity in. the word ordinary would seem to imply some form of ordinary flow. but in practice it becomes a mark on the landscape, which bears no resemblance to ordinary flow. and so i think a lot of the comments have asked for clarity and criteria for determining -- as ken said and maybe they considered this and decided not to, but frequency, duration of flow, to create an ordinary high water mark. that would have been something that i think a criteria that would have been very helpful and beneficial again to the regulator, to the public, in defining what a tributary is. that is one example.

water -- what is a water under the clean water act. is an industrial water that holds industrial byproduct a water meant to be protected by the clean water act? if it is next to a ditch, is it then an adjacent water? these are the kinds of questions that i think when you read the comments, a lot of comments, they ask for clarity on these questions. and the rule tiptoes up and around those but doesn't really take them on. and instead leaves a lot of the definitions vague, like dry land, for example. >> if i can just comment briefly in response. to me, changing the definition of ordinary high water mark would be saying we're going to take a technical term which has an established meaning and give

it a different meaning which strikes me odd. but each thing you talk about is a question of setting out a different criteria or solution and it is necessarily going to be complicated. i was wondering if you think there is a way to write it that is not complicated because you suggestion it fairs on the clarity test because it is complicated. >> that is not what i -- this is complicated. that is not necessarily why it fails to be clear. i think there are a lot of terms that are undefined. that are going to be very subjective, lead to inconsistent results. those are problems in the field. ordinary water mark and dry land, there are some of the chief offenders. something can be complicated and detailed and yet be very clear and i don't think this is that. >> let me throw a comment in on just one thing. and defend the core regulators. i said before in one of my

responses, i don't think it is that difficult to understand if you're a professional biologist or hydrologist to go out into the field and look and be able to identify through field research and being on the ground to find an ordinary high water mark. it's a state of art. it's not something we concocted. this is a technical term of art long used in this business. the corp regulators don't have difficulty finding, identifying ordinary high water marks. one of the things when we -- in context, one of the things that could have been done perhaps as an alternative to ordinary high water mark is to require gaging, putting in gauges all over the place, which would confound a whole host of other issues that we would have been criticized

for, for requiring people to put gauges in their streams, whether the gauges are properly maintained, are they adequate and being read properly. this is a common sense surrogate. clearly everybody reads the case, justice kennedy recognized that it was a term of art. didn't come up with anything himself that could be better. but he did identify that the breadth could be used for unlimited capabilities. and both in the 2008 guidance that we did after rappanos and follows up into this rule. we say and identify the things that justice kennedy said. it's got to be of significance to represent the type of duration volume of flow that one would expect that ordinary high water mark to contribute the requisite flow one would

probably find to be in an area where you would have a significant downstream effect. i don't find that complex difficult or problematic to be honest with you. >> we had another question at the back of the room. >> thanks for taking the question. whit with the american society of civil engineers. al you mentioned this earlier. i want to hear it again about how this rule -- when this rule will take effect on permits when they're filed. kind of sequencing how this will all play out once it entered the federal register. just for those of us who have folks in the field, clients stake holders. the second part of the question would by for deidra. i'm this is a little speculative i'm sure there will be folk whose file suit on this rule. can you walk through a possible scenario in terms of senses of

the environmental law in how you can challenge a rule with standing issues and all those types of things, whether it has to be a permit filed the day of. it takes effect. walk through what that would look like in a hypothetical sense. >> could you start with when you expect the rule to come out and be published? >> the rule has been submitted to the federal register. the rule is under the formatting process that the federal register people go through. it gets kicked back to the agencies. it will be kicked back over to pa. i assume you haven't received it yet. it should be any day now. we should see the camera ready version of the federal register. that's quickly reviewed by people that are expert in reviewing and making sure it contains everything and we didn't lose anything due to the formatting. it's mostly to make sure all the

paragraphs and subparagraphs and subsubparagraphs all line up properly so when people cite to things it's not screwed up. so we expect that to happen any day now. we expect the turn around to be relatively quickly. we're expecting the thing to show up in the federal register within the next two to three weeks max. i think. three weeks is probably on the outer side. we would hope that within maybe the next two weeks for that thing to go into federal register. how does that affect the grandfathering provision? the date that it goes into effect will be kind of the benchmark date if you would. the corp district commanders and regulators who have a bunch of permit requests and applications i should say and requests for jurisdictional determinations, they need to look at the date it's announced in the federal

register and make a determination whether the application or the administrative record is sufficient upon which to make a decision on that day. and, again, it doesn't have to be made before it's in the federal register. it could be made after. they've got to look on it as of the date it's in the federal register whether the record is sufficient upon which to make a decision. if it is then the applicant will be informed and notified that the -- they're jd or permit will be issued under the old -- under the existing rule. because it's not in effect yet until the 60 days expires that it's after publication in the federal register. so if the applicant sells i think it's beneficial for me to kind of come in under the new rule, please hold it until after the effective date and issue it then. the corp will issue it to the benefit of the applicant. if they want to proceed, they

can proceed. if they get an application in and if they can process it before the 60 days before it goes into effect they can issue anything under the old rule provided it's issued before the new rule takes effect. and i will say the corp is working on implementation guidance to its field. and that usually is stuff that finds its way to the corp's district websites. and for those that are working in a particular district or with a particular district you can look on their websites. you'll probably find this guidance. that's the general way we're approaching it. >> can i ask a follow up question on the grandfathering issue? which has to do with what if you have a jurisdictional determination that is all the information is in, but there's no permit application. al so there's no permit application

that's considered complete. how -- it's a pending jd. it's not associated with a permit application. >> don't have a permit application? >> no, it's someone who wants to know. >> the j.d. is good for five years. >> but it is pending and it hasn't been acted on and it is sitting with the corp now. >> and it is complete? >> well -- >> say it is complete. >> do you have to get a complete determination from the corp? >> no. the corp will make the determination when -- i'm assuming it is in the cue and the applicant wants it to be decided on. the district engineer will make that determination. it is not something someone has to apply for or seek out. >> if you have a complete j.d. submission in now and it should be decided -- you want it decided under the existing rules, the existing rules apply. >> correct. >> so can you then please take

and we'll ask for some comment on the next rule and it is final and published in the general register and up for challenge in the courts, what courts have jurisdiction and what other types of challenges, are there only facial challenges through the rule itself or brought there individual determination appeals? what do you see in the courts? >> it is a real good question. i know steve samuels is here so i'm interested in his thoughts and he's shaking his head no, he's not talking. i know there is an issue. the preamble, i think, raises the issue that this rule should be brought under section 509, i think. it is an interesting provision in the preamble, which i don't think it is in the rule itself, is it? >> it is in the text. >> it is in the preamble. and it kind of makes the point on one hand cases have find it might be under 509 but see those other cases.

and i don't have a lot of experience with that provision but it essentially requires epa rules to be challenged in a circuit court. of course this is a joint rule. with epa and the corp. and corps rules generally are are challenged in the district court. section 509 talks about other limitations under the clean water act and the question will really come down to is this considered under the law an other limitation under the clean water act and as the epa has noted in the preamble, there are cases on both sides of that. i think one of the most recent ones has to do with the water transfer rule where they found that it was actually giving industry relief, saying that something wasn't a permitted regulated discharge and therefore wasn't a limitation. how this rule -- i mean this is a fundamental term under the clean water act.

there are exclusions. there are -- so how this will be interpreted, i think, whether it is properly brought at a circuit court level, will be interesting. and it will be interesting to see what the government's opinion on that is. if it is brought -- if it is properly brought at say circuit court, the circuit court will assess they have jurisdiction and will then decide the case. and there may be multiple petitions brought across the country. and those petitions will ultimately be consolidated at one circuit court if it is properly brought at the circuit court and decided. meanwhile, you will likely have district court complaints filed as well. and those may be as applied challenges, facial challenges. it is going to be complicated.

when this rule does go into effect. under 509, a significant point, is that it does have a statute of limitations associated with it and that claim has to be brought within 120 days and much sooner because it will be somewhat of a race to the courthouse with multiple petitions being filed sand i think it is like a 10-14 day period where those claims will ultimately be before a multi district court -- or multi -- >> district litigation. >> an mdl. >> yeah. that will decide where the case is brought. >> thank you, deidre. >> i'm happy to hear these guys thoughts on it. >> what she said. >> we're happy to have you -- have there be no litigation on it at all.

so if there is no litigation, there is legislative action so there is a bill through the house and pending in the senate. john, would you be interested in any thoughts you have on the senate bill 1140, if you would give us an explanation on what it does and your views on it. >> in brought strokes it does two big things. it first requires the agencies to start from scratch on a rule making. and second, it sets out some rules of decision as to what kinds of features can and can't be protected in such a rule making. and we think there are multiple problems with that though. if you want -- if your worried about clarity, that bill ain't the place to look. so it introduces a whole suite of new notions into clean water act juris prudence. it would -- like i say, reboot

the entire regulatory process. but fundamentally, i think it is based on a couple of flawed premises that -- first, that the agencies failed in some way to adequately consult with stakeholders about this rule. and that, i think is belied by the enormous number of meetings the agencies had about not only this proposal, but bear in mind that this issue has been debated for the better part of my children's lifetimes. and has been a public concern throughout that entire process. the agencies as i think craig alluded -- eluded to that they

took public comment on, that alone got 200,000 plus comments and they got a million plus comments on this. the agency -- i'm sure you got some -- i hope you got some frequent flier miles out of the amount of consultation you did with various folks of all stripes. and so -- the motion that somehow redoing this rule with -- and talking to some new set of people, i honestly couldn't imagine who that might be -- nor can i imagine that there would be no issues developed in the course of that consultation that haven't been not only raised during the last almost 15 years of ambiguity about this issue, but vetted nine ways to sunday. and then the other thing that i

think the rule -- pardon me, the bill presumes, is that somehow the states, without, in the absence of this rule, that protection of our waters would be just fine thanks to state programs. and as eli's analysis looks at, there are restrictions in the states in two-thirds of the

state that make -- that can make it more difficult to protect state waters that the federal government doesn't protect. and when this issue was last vetted by the supreme court, 30 plus states weighed in and said, please make sure that the clean water act protects unnavigable water because doing it ourselves would be really hard, among other reasons. >> we have gotten close to our time and there are mentions of the eli website and there are regards that [ inaudible ] on our nauls. and i want to thank our panelists for sharing thought, care and expertise on these issues. for more go to the national wet lands news letter and to learn more look at our online resources and attend the national wet lands awards which is an amazing event to come and see. six people around the country who recognize people from private land owners to government officials to ngo folks who really are doing wonderful work. i think all of us are well served to have the professionals you see here in front of us doing their work and their job amazingly well. thank you for sharing your time

with us. we prech appreciate it. and i want to thank the members of eli for making today possible and doing what we do. so let's give a round of applause and also thank you for being here. [ applause ] coming up tonight a look at efforts to ensure global financial stability and then a house hearing on international child abductions. that's followed by a hearing on the possible link between opiod medications and veteran suicides. later trade pacts to open new markets for american businesses. monday greg metcraft, chair of the international organization of securities commissions spoke about efforts to ensure global

financial stability and to prevent another financial crisis. his remarks came during an event at the national press club. this is an hour. >> we are going to get started here. let's make sure the cell phones are turned off or any other vibrating or noise making devices. good morning and welcome to the national press club i am hosting this morning's news maker news conference featuring mr. metcraft who will speak as chairman of the iosco. they have been at the forefront of global initiates to head off another financial crisis like the one that devastated markets

not so long ago. we saw long time financial institutions disappear and millions of people thrust into unemployment. the economic recovery has been a long time coming. since the melt down national and international regulators have focused a great deal of attention and effort to change the way financial institutions are regulated in an effort to guarantee global financial security and stability. thus was born the notion of the institutions ss [ inaudible ] so if they fail their failures don't take other institutions down with them. chairman metcraft has been making headlines by going public with his view that they may have gone too far. chairman medcraft believes

regulation should not stifle risk taking buzz risk taking wealth creation. [ inaudible ] capital markets for support economic growth and will comment from a market regulatory perspective and he will comment on where the debate might head and what iosco thinks is required in the asset management sector consistent with iosco press release issued on thursday. just a few procedural notes before i turn the over once the chairman has completed his remarks we will open the floor to questions priority given to credentialed media. when you are called on please identify yourself by name and by organization. chairman medcraft the floor is yours.

>> thank you very much. good morning everyone. well i'd like to thank the national press club for the opportunity to actually talk about i think some important issues that are currently on the international regulatory agenda. and as david said, today i'm here in my capacity as the chairman of the board of the international organization of securities commissions or iosco. so today i would like to touch on three key topics. one, is to briefly describe what iosco does and our role in what i believe is so important for the future which is how we build globally integrated capital markets. having a vision whether it is in 20, 30 40, 50 years, having a vision for free flow of capital

around the world debt capital markets, equity markets and funds management. and having the markets at the end of the day to achieve that is about having trust having trust among regulators and by investors in markets. and most importantly and i think we have to remember is the role that capital markets do and will continue to play more importantly into the future in underpenning growth and jobs. i think it's a very important theme of my speech today is financing growth and jobs around the world. so secondly i'm just going to comment from a markets and financial services regulative perspective on where the international regulatory debate has been since the crisis. and third, i'm going to comment on where the debate might head

and iosco thinks what is required in particular in the asset management sector. i should say at the outset that i'll limit my comments to the international regulatory agenda and experience. it's obviously not appropriate for me to talk about issues at a national level here in the united states. these are actually matters for your own regulators and policy makers. so let me turn to iosco and who we are and what we do. so iosco brings together financial services and markets regulator from over 120 jurisdictions around the world. we actually account together for over 90% of the value of global capital markets debt capital

markets, equity capital markets funds management and derivative markets, a very significant part of financing the world economy. our members include regulators from the largest and developed jurisdictions to frontier jurisdictions with tiny capital markets. our fundamental objective -- if you think about what we do as financial services and market regulators our fundamental objective is to allow the markets to do their job. and the way we do that -- the job is actually to fund the real economy and therefore economic growth and therefore creating jobs. that's what we are about. and we do it by making sure that investors basically have trust and confidence in the markets and that the markets seem to be fair and efficient and transparent and that any systemic risks that may be posed

are mitigated, not eliminated but mitigated. so basically, as i said, if markets cannot ride effectively we believe they provide a key element to economic growth wealth and jobs. and basically we work together globally in a number of ways, all of which have cooperation and collaboration at their core. that is what we do. i want to focus on seven key activities of how we work around the world together to give you a much better feel for what we do. so firstly and most importantly we develop gardens for our members to use in deciding how they regulate. if you think about the ultimate mission of having global integrative markets and having common global approach to how

you approach regulation is really important. so we look at whether it's in the area of giving guidance in terms of regulatory supervision or enforcement, our two more critical tools as what we do as markets regulators. and to give you an example, since the crisis we have developed gardens among other things on regulator credit rating agencies, the iosco code of conduct is embedded in many legislatures around the world, on hedge funds, secureatization asset management and most importantly recently in financial benchmarks. and last week what we did along these lines is we actually published guidance on what

framework looks like basically guiding countries who are looking at how they can gain confidence that we all can rely on in terms of enforcement solution. that's what we do. the second thing is not just giving guidance on conduct supervision and enforcement to help countries around the world have a consistent approach we cooperate on enforcement how market regulators ensure we are able to enforce cross borders around the world. our multi lateral memorandum of understanding between members on enforcement investigation forms absolute core of how market regulators inforce around the world. through that cooperation we are able to go through jurisdictions and get information we need. you may be aware that most stock

exchanges around the world will not allow foreign jurisdiction located countries to list unless they are a member of the iosco mmau. there is the ability to cross borders. we have 105 members assigned and they use it to prosecute cross border market abuse which in turn provides confidence to investors investing in cross borders. the third thing we do is supervising the conduct of those we regulate. we actually use principles of supervisory cooperation which we developed in 2010. and if you think about regulation and how we can build confidence these three elements are important. one is giving guidance in terms of regulatory standards. the second one is actually how you can cooperate in supervision and the third is about enforcement. it is simple, the three things

that build trust and confidence between regulators. the fourth key thing that we do is actually what we do for tomorrow's engines of growth which is the 80 countries that are our growth and emerging markets group. we actually look to help them build regulatory capacity. and we do that across a number of different initiatives. so we have education and training programs. in fact, we are in the process of launching an online training program for regulators around the world in emerging markets. we conduct in-house courses for regulators. but even importantly we actually have an online knowledge database where regulators in emerging markets can ask regulators in other parts of the world if they are facing issues and looking to develop policy in their country. it's all about providing resources to actually give them the information to fill the gap,

to help them develop their markets. we also undertake assessment programs where we have just done one in the case of pakistan where we assist them against international standards and identify the gaps so that investors coming into that country can have an idea of actually how that country fits with international standards. again, that is building regulatory capacity. what it is doing is building trust and confidence in that country as an investment jurisdiction. and most importantly another initiative we decided is we are going to look at developing regional hubs on a basis around the world in different regions of the world. that will define us as a global standard setup in that we will be based all over the world. so very excited about our regulatory capacity building work. the fifth area where we provide support and basically think about it is people.

nothing is far more compelling than the opportunity for building trust and confidence around the world and then having the ability to encourage and supporting activity among our members. to that end we have launched an international register which allow regulators from all over the world to identify opportunities, to post for various periods of time. the reason this initiative is one i discovered many countries have bilateral initiatives which many others were not aware of. frankly it is about connecting the dots connecting the dots. connecting the dots is how you actually build global cooperation. it's how you build globally integrated markets. the sixth area is getting members, helping members understand emerging risks in global markets because if you

want to be a good regulator and proactive and forward looking then you need to be watching what is coming ahead of you in the future. and that has been a major thrust particularly of mine over the last few years where we have been focusing on digital reduction and what is happening on corporate governance and informing members so they can be better at what they are doing and not actually resisting development but actually helping business harvest the opportunities that come from innovation while mitigating the risks. and the seventh area we focus on is collaborating with industry. if you are a markets regulator you have to be collaborating closely with industry. and also with other international forums like financial stability board where i and others represent the interest of our members. there are the seven key aspects

of what we do. all seven of those contribute to building that global mission towards integrated capital markets. i will say that i believe that these activities are what has helped us emerge as the key global reference point for financial services and markets regulation. and that is the way we want to be seen. it's the way we are seen. and most importantly that we strengthen that perception in the future. and today is a great opportunity to highlight to you actually what we do in that mission. so as i said earlier, we have grown with the increased importance in the markets we regulate. and these markets, i believe, capital markets will continue to play an increasing role in financing the world economy. i say that for three reasons. first of all, it is significant increase in global retirement

savings as result of both demographic change in developed countries and some in undeveloped countries and structural changes in developed countries as they evolve. that generally means movement of savings from the banking system to funds management system. the second key aspect of why markets will continue stronger in funding the world economy is the impact of post crisis regulation, high levels of capital required and liquidity. what is happening? you end up with more and more being funded in the market based financing sector. the third key aspect of why i believe market based financing will continue to grow is digital disruption. you all know and will all see whether peer to peer lending, crowd funding, the challenge is

basically intermarket based financing. so i believe that in the longer term iosco's activities will help build globalally integrated global markets which is most importantly and i thought passionately about build the free flow of capital around the world. markets which have the trust and confidence of those that participate in them, markets where regulators had the mutual trust in one another. markets where investors issuers and participants can actually access those markets freely wherever they are whether investors or issuers, new york, london johannesburg. and most importantly, most importantly markets that actually fund the real economy and economic growth and jobs.

so let's talk about my second topic, the post crisis reform agenda. i like to make two particular comments which i believe are important in terms of the context of where i think we should be heading. the first is about the type of issues we have had to address since the crisis. and the second is about how we have gone about addressing those issues. so many of the issues we have to address since the crisis were cross sectural in nature requiring cross sectieral solutions. our work at iosco and something i am passionate about is secureatization. because as you are probably aware is secureatization is seen in many countries around the world as an important technology

to facilitating funding of the real economy. the other issue that we focused on as money market funds has been very well received around the world. in addition many of the issues rise in the post crisis have been new. the regulation of otc derivatives is an example of what has been largely greenfield's territory. at the national level, financial services and markets regulators have had to work with central bankers and banking supervisors more intensely than ever before and i would hope as equal partners which is most important. so globally iosco has had to work with the committee more intensely than ever before. i think also as a part of this post crisis the increasing importance of markets regulators

is now really strongly coming to focus. but it has been a challenging for all of us and i think a very fruitful one. i think we have come a long way. as i said, my second comment is actually about how we have addressed those issues. so let me focus on the reform agenda for what has been called shadow banker, key aspect of the reform agenda. what i or we would now prefer to call sustainable market-based financing. i have a real issue with the bedeviling of the name shadow banking. frankly, i'm not sure it was the right name. i think this has taken on this name of sustainable market based financing. let me firstly point to three points. the first is the fact that the

agenda has for some time been driven necessarily by financial stability and systemic risk considerations. as david said earlier there were dark times back then and there hasn't been really a focus on the world market based financing in funding the real economy. i think that is now where we are today. we need to focus on not on what happened then but how we can take that and use it to help moving more towards the agenda. and, again i think what is important we need to think about how we have assessed the risks posed. the international regulatory community i believe may have been too willing to draw conclusions about the nature and the risks posed by market-based

financing to financial stability. again, as i said, given the traumatic experience in '07 and '08 that is not surprising. but there is a concern that the international regulatory community may have gone too far in seeing problems and has under estimated the effectiveness of the existing tools to regulate market-based financing. it's a very important message that i want to deliver is very much that. the third is about thinking that have gone into policy prescriptions to address those risks. these tools have tended to be based on those used by credentialed supervisors not market regulators. so while i have worked for the banking sector they weren't

necessarily working for market-based financing. so at iosco we have grown increasingly concerned about these developments. they don't fit with the way we look at the world and our responsibilities as markets and financial services regulators. the markets that we regulate are built on the idea of risk taking. that's what happens in markets. people gain money they lose money. that's markets. but that risk taking is actually the essence of the system. it's the essence of wealth creation, economic growth and jobs. we see regulation in markets about insuring that they accurately and fairly price those risks and market participants act with integrity.

if you think about it we all should be aligned in markets with participants because at the end of the day if you don't have the trust and confidence of investors and issuers you don't have markets. very simple. trust and confidence in markets of investors and issuers is essential. that's what we are about is making sure the trust and confidence is there. regulation should be careful not to stifle risk taking. that's what markets are about. and making it expensive and the tools that we develop and use should be tailored to the risks we think warrant regulation and supervision. and the markets space it's not

about regulation it's conduct supervision and enforcement. that's how you regulate markets. that's how you regulate markets. it's not about how you regulate banks. so i would like to outline how i think these concerns should be taken into account in charting a path forward in international work particularly in relation to asset management. you will be aware there has been underway for some three years work under designation of non-bank noninsurer systemically important financial institutions. acronyms are something interesting in regulatory world coming from investment banking. this work has extended to the

asset management space and is now embarking on further work to understand and address the risks posed by the sector. i want to touch on two issues which iosco is flagging and will continue to flag through discussions with the fsb. and these two issues are judgments about the asset management sector and the need to act or not and secondly actionable solutions that we need or may not need in this sector. let me touch the first item. judgments about asset management sector. the first issue is about being careful of jumping to conclusions about the nature and the extent of risks in this space and the need to act. frankly, if you think about it as regulators who focus on

enforcement before we take something to court we have to make sure we have enough evidence to make a case. here we need to make sure that we have fact-based decision making, evidence-based. our view is that we should only progress thinking about solutions once we are satisfied there is strong evidence of a problem. pretty logical. i want to make three points on this. the first also, is about the quality of evidence. this should not be theoretical and drawn from academic papers based on what might have happened in the distant past. it should be based on what we are currently seeing, on what we might think happens in the real markets which we regulate. that is our real experience because that's what we do.

that's what we do every day of the week as market regulators. the second is about making sure that the evidence is collected jointly and collaboratively across all sectors but most importantly -- i know from my days as 30 years in investment banking is with industry. industry having credible data access. it's important to work in partnership with industry before you draw conclusions. it then has a proper evidence base. the evidence is not just simply data. it's about how fund managers, big fund managers are, but about industry practice that they take in addressing risks about the effectiveness of conduct supervision and enforcement. that is why you cannot in what we do, do things without industry, without engaging

industry. at the end of the day they don't want to blow themselves up either. they want to run businesses for the long term. really important that collaboration. the third is about how we go about deciding when a problem or risk is so important that it needs to be -- this is very clear about the objectives and balance we want between and i think this is important the balance we want between financial stability and security and economic growth and job outcomes. so, again i'm not convinced that there is evidence that asset managers put financial stability at risk simply because they are large. as yet, we do not have concrete evidence that this has been or might be the case. in this respect i find the

industry's recent commentary compelling. if you think about it during the depths of the financial crisis net outflows from funds were small and certainly not on a scale to impact a broader market. and another aspect of the current study is the ecosystem of funds management. the focus here is really restricted to mutual funds. excludes sovereign funds, excludes pension funds. you have to look at the ecosystem. that's important. getting back to mutual funds basically the crisis reflects nature of mutual funds. by nature and definition they are investors who are generally in it for the long haul. they generally take short term fluctuations in their stride and don't necessarily rush to redeem. that is the behavior we have

seen. in rare instances where they might managers have tools in place to manage the flow of redemptions. however, there is scope to explore the extent to which some activities of asset managers might pose broader market risks. i am encouraged by the fact that the financial stability board has embarked on work to better understand these risks. work which will inform further regulatory guidance in this area. i see this as a very good outcome of their work. so my second issue i mentioned before was about solutions once we decide where there is work to do. we should not look to find new and possibly inappropriate solutions before we understand what we're already using.

what refinements we may need to the existing tools we currently have. let's not re-create the wheel. so in the asset management space, market regulators and asset managers already have tool kits at their disposal. tool kits from conduct supervision and enforcement which i believe have been effective in managing disruptions over decades in markets in jurisdictions around the world. and these include rules on eligible assets, on liquidity thresholds, restrictions on leverage, on stress testing on knowing your investor requirements and most importantly in terms of more recent times redemption restriction tools including

gates, side pockets and suspensions. i have seen them working in my market. i have seen them working in other markets. so iosco as the regulator of including funds management around the world we have described these tools in two previous reviews and provided guidance on when and how they might be used. and we have actually presented these tools to financial stability boards to explain this is what we do. that is what we do. here is how it works. i think part of it is about education. we are very happy to educate. in 2012 we published the principles on suspension of redemptions. again providing guidance on when and how the managers should suspend redemptions. our report there set out two market regulators around the

world alternative measures which could be used to deal with iliquidity based on real experience around the world not just theoretical possibilities in member jurisdictions, real world regulation for real world possibilities. sort of logical really. so in 2013 we also published the principles of liquidity risk management which includes guidance about managing liquidity on a day to day basis based on real experience. we published the recommendations on the use of these tools for money market funds in 2012. and if we decide there is an issue then surely the world we have already done in terms of suspension or liquidity management should be the starting point for any future work. we should not use tools

developed for banking and insurance space as our starting point. this is markets. we understand markets. this is what we are looking at. these tools were developed to deal with firms who have different risk profiles to asset managers frankly like creating a square peg for a round hole. it has to be appropriate for use. and we are dealing with something that is so dynamic and so important as funds management. as i said before in terms of facilitating the funding of the real economy. let's be careful how we tamper with this. so at our meeting in london last week the board of iosco discussed how we should be progressing our work in this asset management space.

let me outline to your our decisions last week. we decided three things. [ inaudible ] in identifying potential systemic risks and vulnerabilities in the asset management space. the second is that this review should take precedence over further work on methodologies for the designation of systemically asset management. let's sort out if there is a problem first. and the third was once this review was completed the work on designation should be reassessed. our thinking was this review should focus on four areas. and the first is actually about insuring that we have the data to monitor and understand the risks in what is clearly a

dynamic space. that's about collecting more and better data than we currently have. and that then will inform a better decision making about risk management and monitoring. and to that end i think the s.e.c. had published a proposal, a risk rule making proposal on looking at better data from the asset management sector. europe has done a similar thing. i think what we need is to have ultimately some sort of standard template where regulators around the world can actually share better the data about this sector. that is so frankly logical in a modern world particularly in a world where we want to have globally integrated capital markets. it's having an ability to share information on a consistent easy fashion. frankly we know the tools are there it is a matter of

harnessing them. so the second is about liquidity management and those that are currently being dealt with at the moment. so liquidity management is at the heart of asset management. talk to any asset manager liquidity are essential. so we need to be comfortable with liquidity risks and how they are being effectively managed. that is something that we will be focused on. in particular thinking about tailored to particular types of funds the sort of stress test that might be appropriate, appropriate to the fund, appropriate to the fund, not to a bank. the other thing we are looking at iosco at the moment because that is what we do is debt capital markets. we look at bond markets. we have a study at the moment looking at the risk and structural issues in bond

markets around the world because that's what we do. and the third area we want to look at is leverage which we will do. and the fourth is about developing a better understanding of the risks posed by the transfer of investment mandates in times of stress. it's a logical thing for a regulator of funds management to think about. so wherever we land after this work and whatever guidance we develop we'll need to be sure we don't unduly stifle risk taking. it has to be measured. if the core characteristic of markets it's a characteristic of markets that they take risks which ultimately deliver wealth economic growth and jobs. so in conclusion i want to flag the importance of being careful and of being cautious in driving

a regulatory work on market-based financing and in particular in the asset management space. what we need to do is to ensure that our work is not just about insuring the stability of the financial system but recognizing the role markets have to play in funding economic growth and creating jobs and facilitating that role. at the same time insuring that recognizing that markets are all about taking risks and they have to be regulated in a very different way to banks. we need to make sure we have a good case before we act in these areas. and we need to ensure that we recognize that the tools and approaches we currently have as market regulators conduct supervision and enforcement are a great starting point and

should be the basis of any further regulation in this area. at the end of the day if you think about it we recognize fundamentally that for markets to do the job to fund the real economy you have to have investor trust and confidence. everything we do in conduct supervision and enforcement is directed at that because that's actually why markets exist and why we want to make sure that they can do their job. equally try to make sure that trust exists around the world so markets cannot only do it in a single country but can do it integrated throughout the world. thank you everybody and thank you again for the opportunity to address this group. thank you. very interesting discussion i

think. i'm assuming we will get a lot of questions here. this is the q&a part of the program. as you pose a question please identify yourself. >> with reuters, i want to ask you about the fsb. they have are supposed to come up with rules for asset managers in november, i believe. what do they think about what you are saying now? have you coordinated your message with them? >> well, look iosco is an independent standard setting body on behalf of the world's regulators. and we participate in the financial stability board. we do not report to the financial stability board. but we coordinate with them. we did inform the day we took

this decision and i spoke to mark and i believe that he is supportive and understands the reasons for why we have taken our decision. so that's where we stand. >> you think that package is still going to come out in november? >> that is for the fsb. as far as -- i think what is important is that we have a meeting in new york tomorrow, the standing committee on risk of the fsb and i guess we will discuss iosco's position. let's face it, at the end of the day we are the regulator and standard setter for funds management around the world. it's not the financial stability board. i think that is clear. >> it seemed like a few months

ago doubling down on approach for asset managers. can you walk us through how you got from that to reversing course on the plan? >> i have been involved in this for a while. my background was in asset management. i think it has been a journey. the journey should be establish the problem, the facts and then decide a solution. i have been troubled that we seem to be developing a solution before we develop the problem. so i think that's why we have ended up where we have is to say -- i think you see the fsb second consultation where we say let's focus on activities. i think it has been evolutionary process. i think that you have seen a more assertive iosco and will

continue to see a more assertive iosco from now on. we believe now that we realize that what we regulate which is the markets is just simply going to play a more important role in funding the world economy. >> just a follow up question. you said governor carney i think was supportive. do you -- >> he understood what we were coming from and probably wouldn't want to quote him beyond that. he understood what we were saying. >> you expect fsb to follow your league? >> we are an independent standard setting body. we don't report to the financial stability board. we have a voice there. we would like to have a stronger voice there because we represent a small percentage of the voice of the financial stability board. we are trying to change that but we can still represent a very

vocal voice. >> freelance writer on assignment for risk professional magazine. you said at the beginning that identifying and monitoring emerging risks has been one of your priorities. what emerging risks do you see? >> well, clearly we think that -- we think about the risks as sort of what i see as probably four mega trends. the first one is clearly structural trends around the world moving into the markets which for the reasons i mentioned earlier. and that is just going to keep going. the percentage funded through markets will be greater next year. it's just going to keep going. the second mega trend is clearly digital disruption.

and what that in particularly digital disruption and financial services and markets. we see that right across the value chain. frankly, my attitude to this is what we need to do is where we -- generally the reason digital disruption happens is because generally because seems to be value between the consumer and the originator. so generally results in a bit better outcome for consumers. so i always say let's look to see what we can do in harvesting opportunity and mitigating the risk. at the end of the day the outcome we want is the same. it's the same. we want to make sure that investors have got trust and confidence. processes to get the trust and confidence with whatever it is means a different way of thinking. the same time it means you have to think about how you enable

those startups to actually talk to you and make sure because the issue is the financial system is not yet that adaptive to the digital world. one of the things we have done in my company of australia is set up an innovation hub looking at online portals advisory committee. i guess facilitating that innovation is important. another aspect, though, in terms of risk is cyber resilience. that goes hand in hand with what is happening with digital. there i have been concerned about making sure that -- i think you -- you can't really stop, can't be completely protected. i say the united states national institute security standards is a fabulous methodology. what we are looking at is what we can do -- looking across the

various primary markets funds management derivatives, what we can do in terms of guiding in terms of setting various i think not surprising that cyber attack is the next black swan although you're not supposed to know the black swan. but this one looks obvious. i think that's a second thing. the third area for us always is what i call innovation driven complexity. whether it be products, whether it be markets or technology itself. when i talk about products, i talk about you know complex derivative products, targeted at investors aren't world. and we're doing a lot of work on that at the moment. the other one is the in markets is clearly high frequent

trading. and that goes to the heart of markets. you think about it. i said before, the fundamental thing of markets is to fund the real economy. so there i think we have to be careful in term of the liquidity out of the market, for example. and i guess the fourth key for us is getting that balance between allowing the market the free market to do its job and balancing that with investor trust and confidence. you think about it the two should be aligned. frankly, if you don't have confidence, trust and markets you don't have markets. and if we don't have something to facilitate the system, so those are the three key areas. the other one this i think is the big issue that is emerging

is conduct and culture. i think we'll hear more about. this what frightens me is when we peel the onion and look in supervision and what we see. it is the issue of the need to change culture. i'm very passionate about it. don't think where we're headed post cross-ice post crisis is simple. it's about doing the right thing by your customer and getting that culture back. having been in banking 40 years ago, getting back to thinking about just dong the right thing is probably what we've all got to think more about. i think there say lot of pro active stuff happening here. unfortunately though, i think you've got to have -- it's a carrot and stick approach.

the carrot is where we see our country without surveillance. dealing with the top management of boards and saying you've got a problem. that's important. the easy way is pro actively dealing with trying to fix the culture. helping ports do it. but equally, i think it's the stick. the stick is important unfortunately. we know human nature is driven by often three things. one is people who just fear going to jail. probably getting caught and what happens if you get caught. so making sure i believe those in management who are responsible, i think individual accountability is more important, probably more important than big corporate finds. at the endst day, corporations are simply people, are simply people. and that determines behavior.

i think if you're going to get culture right and have trust and confidence in the banking and financial system, i think the way to win that back is to make sure that there are the right check and balance there's. we're going to hear a lot more about. we're seeing what is happening around the world and for our own exchange and benchmark. there is a lot of work to be done there. >> yes, we're -- we hit the fifth anniversary of dodd-frank. how well have the i remember how difficult it was to get the regulators legislatures onboard. to do it 20 times over and 20 different cultures is kind of difficult. so how -- has there been -- how good of a job has there been? >> look i think it's incredible. it's massive. what happened since the crisis.

look at the otc derivatives areas. i had breakfast this morning and it's incredible how far around the world regulators are now cooperating. and even them, it's one team. we may argue about which team view is prevailing. look at the end of the day. i say this to the financial stability board. you know we want to be more inclusive in fsb so we don't get the wrong outcome. i think working -- look tend of the day, the one point i said bemerging -- globalization is a fact of life. that is the other mega trend. i didn't mention before. it's a fact of life. markets are globalized, right? the internet, it facilitates globalization. so we are globalized. we're in markets. therefore, it's essential we work as more and more globally.

so i do believe it's working well at fsb. look, in the crisis some things work well. other things are still in trying. when you think about it, there was a massive amount that was done. many of the measures is effective. i believe the issue of derivatives, you look at history, one thing we know it's quite interesting in lessons of history is normally you find that normally it's the fire to recognize that markets have changed and become more global is often when you end up with a process. when markets are ahead of regulation, that's where -- you even got the crisis. history doesn't repeat itself but, you know, it rhymes very well. i think we need to learn the lessons of history. there are other crisis and we'll

learn again. we're shaped by change. >> thank you. >> hi. >> hi. >> given the global nature of markets that we were just talking about, do you see the legalant antly identifier part after your plan going forward? >> well, i mean that is -- i think it's a great initiative, the financial stability board. i think that ability to track through is very important. i can't really kmontcomment on sm management. i think that is a great initiative and i welcome it, actually. >> dave michaels with bloomberg news. you noted during the crisis that mutual funds were not significant but you also talked about liquidity risk going forward and liquidity management. can you elaborate more on what you see, the specific kinds of funds you see as posing liquidity risk and then also you

mentioned bond markets and that part of your talk. you could elaborate a little more on what your concern is about bond markets? >> so in relation to -- a lot of this, frankly, work we're doing is to reassure the financial stability board and markets that, you know the tools we have are appropriate. okay? and -- and if there is a need for change to identify it. so in the case of funds you know, as i said we're going to be looking at at the activities of funds and how they deal with you know liquidity mismatches and adjust and so i can't really predict what the outcome of that will be. but what is appropriate is obviously depending upon the structure of the fund and the way in which it's -- it may -- liquidity redemptions, for

example, stressing to see how it would affect in a liquidity test and whether it would work in a simulated study. and that again feeds through you know, to just making sure that people are confident the system works. then communicating the stress scenario to everybody. that underpins trust and confidence is what we're all about. equally in the secondary bond market, we've all heard about structural issues and the bond market. and so we're looking at that -- we're doing a survey across the world of bond markets and my background is in fixed income markets. i must say in this area i think that it's quite interesting. generally we know that there is a whole talk about market making, for example. well, you know, generally unfortunately, you know, the issue in market making often is that when you need the liquid it is generally not there. so as a -- when i was in

markets, i never relied on market makers to be there when i needed it, frankly. you need to think about other options. i do think, you know on one hand you've got discussions people saying well, yes, the world has changed. but -- about the fact that the liquidity is less. if you think about it, precrisis, you had a massive amount of leverage liquidity in the banking system because of what was going on training box. what we want in markets is sustainable markets. sustainable bond markets. whatever we, have we want them sustainable. i never thought that what we had precrisis was particularly sustainable because it was liquidity driven out of banks. you have people saying maybe we have to do something in liquidity and capital because it's making it hard. i don't think that is the solution. you have others saying if something really goes wrong central banks can provide the liquid. i don't think that is a solution either. that